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CUNA iBarronsi story on corporate costs off the mark

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WASHINGTON (4/20/10)--Current corporate credit union loss estimates of $9 billion to $11 billion cited in a Barron's column are actually somewhat lower than earlier forecasts, notes Credit Union National Association (CUNA) Chief Economist Bill Hampel following the column's appearance this week. The Barron’s column recounts corporate investments in high-yielding, mortgage-backed securities as part of a strategy to offer lower-cost services and higher yields to member credit unions. “This wasn’t greed exactly; credit unions offer no stock options. They needed higher rates to subsidize their services and attract more customers,” writes columnist Jim McTague. The column includes loss estimates from CUNA’s Hampel of $9 billion to $11 billion on the portfolios from U.S. Central CU and WesCorp FCU, which were placed into conservatorship last year. Hampel said credit unions should bear in mind that the $9 billion to $11 billion figure in the Barron’s column includes both $5 billion in losses already absorbed by the capital of the corporates, plus current estimates of $4 billion to $6 billion to be covered by the National Credit Union Share Insurance Fund, which credit unions are paying for through premium costs expensed over the next six to seven years. “The Barron’s column should not be read to suggest that the costs to the share insurance fund on the corporate portfolios is rising from an original $6 billion to something between $9 and $11 billion,” Hampel explains. “Rather, the loss estimate to the share insurance fund has actually fallen slightly from $6 billion to something between $4 billion and $6 billion.” Hampel adds that these are estimates on a portfolio whose actual losses may not be known for several years or more.

Treas. digital push could save millions in funds trees

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WASHINGTON (4/20/10)--In a bid to reduce costs, enhance customer service and minimize environmental impact, the U.S. Treasury on Monday announced “a broad new initiative to dramatically increase the number of electronic transactions that involve Treasury and millions of citizens and businesses.” The change, which, according to the treasury, will “increase reliability, safety and security for benefit recipients and taxpayers,” should save over $400 million in funding and 12 million pounds of paper “in the first five years alone,” according to Treasury projections. The Treasury will require individuals that are currently receiving social security, supplemental security income, veterans, railroad retirement and office of personnel management benefits to receive those payments electronically as of March 1, 2013. New enrollees in these programs will receive their benefits electronically beginning on March 1, 2011. The Treasury will require all businesses to make their federal tax deposits electronically and will also “eliminate the option to purchase paper savings bonds through payroll deductions” for members of the private sector beginning in 2011. Federal employees will be required to purchase those savings bonds electronically as of Sept. 30. The Treasury and the administration are strengthening their own direct deposit protections ahead of the electronic deposit turnover. Treasury Secretary Tim Geithner said that the Treasury “must lead the way in developing methods to deliver payments that are safe and secure in a manner that is efficient and reliable," adding that the millions in savings and lessened environmental impact due to the changes make them “a win-win for all Americans."

SEC v. Goldman Sachs could brush against CUs

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WASHINGTON (4/20/10)--The U.S. Securities and Exchange Commission (SEC) late last week charged Goldman, Sachs & Co. and its vice president, Fabrice Tourre, with “defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.” In its complaint, the SEC “alleges that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS)” and “failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.” Specifically the SEC has claimed that hedge fund Paulson & Co. “paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.” Essentially, the SEC is alleging that the financial product produced by Goldman Sachs was designed to fail so that Paulson & Co would benefit by betting against it. According to the SEC, Goldman Sachs told its investors that ACA Management was in charge of the portfolio, while, in fact, Paulson & Co., a hedge fund, was selecting the individual bonds that it was betting against. The end product, which was known as ABACUS, netted Goldman Sachs $15 million in fees from Paulson & Co., while individual investors in ABACUS “are alleged to have lost more than $1 billion,” according to SEC estimates. In a statement, Goldman Sachs said that the SEC charges “are completely unfounded in law and fact” and that the firm will “vigorously contest them and defend the firm and its reputation.” Late last week said that the SEC would look at “deals with similar profiles or any deals where disclosures were not properly made.” It is unclear whether this litigation will have any bearing on the undervalued assets of corporate credit unions, and the Credit Union National Association will be watching the developments closely for implications that could be used to support an increased valuation of the corporates' undervalued assets.

House to back fin lit month CU Youth Savings Week

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WASHINGTON (4/20/10)—The House later today is expected to adopt a resolution supporting the Credit Union National Association’s (CUNA) National Credit Union Youth Week and the goals and ideals of Financial Literacy Month. The theme for this year's Youth Week, which ends on April 25, is "Get in the Savings Game." A total of 395 credit unions have registered for the National Saving Challenge, which takes place throughout April. CUNA also sponsors a National Youth Savings Challenge during the same month. Credit unions are celebrating Youth Week by taking part in community-oriented activities, including donating funds to the Children’s Miracle Network and local food pantries. Financial Literacy Month, which began on April 1, seeks to raise public awareness about financial education. CUNA President/CEO Dan Mica said that CUNA “is proud to carry on the legacy of its member credit unions through its support of Financial Literacy Month," adding that CUNA is looking forward to helping current and future credit union members “become ever more financially literate."

CU issues up in Congress committees this week

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WASHINGTON (4/20/10)—Senate debate on S. 3217, the Restoring American Financial Stability Act, could officially begin later this week if that bill has the 60 votes needed to move forward for full consideration. If Senate debate begins on the bill intended to revise many rules that apply to financial institutions and the financial industry, it could continue into next week. The Credit Union National Association has expressed some concern over portions of the legislation that address remittances and that limit the National Credit Union Administration’s examination authority to credit unions with under $10 billion in assets. Sen. John Tester (D-Mont.) last week told the Helena Independent Record that there would “be an opportunity to change the bill,” adding that “community banks and credit unions didn’t create this financial meltdown we’ve experienced” and should not “be made to jump through the hoops that the mortgage bankers, the investment bankers and Wall Street folks have to.” On the House side, legislative action will likely be concentrated in the committees, with the House Financial Services Committee on Tuesday holding a hearing on the "Public Policy Issues Raised by the Report of the Lehman Brothers' Bankruptcy Examiner." U.S. Treasury Secretary Tim Geithner, Federal Reserve Chairman Ben Bernanke, and Securities and Exchange Commission Chair Mary Schapiro will testify during that hearing. House hearings on corporate governance, national flood insurance program reforms, private student loan bankruptcies, and the federal government's Troubled Asset Relief Program (TARP) will also take place during a busy week. Senate committees will also hold hearings on the U.S. Small Business Administration’s 2011 budget, the debt settlement industry, and the role of credit ratings agencies in the financial crisis.

Inside Washington (04/19/2010)

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* WASHINGTON (4/20/10)--Rep. Paul Kanjorski (D-Pa.), chairman of the Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises, announced a hearing to examine legislative proposals to give investors a greater say in corporate affairs. Kanjorski held a similar hearing March 11 focused on corporate governance and campaign finance legislative reforms. The hearing will specifically focus on H.R. 2861, H.R. 3272 and H.R. 3351. “Each of these proposals has the potential to make a public company’s leadership more responsive to investors’ concerns,” Kanjorski said ...